Once More Unto the Cliff, Dear Friends

It tells you something about the news media that before the House vote Tuesday, talking heads were warning Americans that unless the GOP House voted for a bill to stall our going over the fiscal cliff, taxes would go up on 98 percent of Americans. President Barack Obama's big talking point matched the cable news narrative. Breaking news: Republicans were ready to raise taxes on the middle class to shield top earners from a tax increase.

Now that the cliffhanger deal is done, the old narrative has prompted many reports to bury the new lead: This package, which raises income taxes on households earning more than $450,000, also means that 77 percent of American households will be paying higher taxes, according to the Tax Policy Center.

An end to a two-year temporary payroll tax holiday represents a rise of 2 percentage points in the Social Security tax for folks who earn paychecks. (That's a $1,000 tax increase for the median family.)

The president's claim that he was trying to "protect our middle class" from Republican tax increases was -- how to say it? -- a tad hollow.

Don't get me wrong. I think Washington was right to end the temporary payroll tax holiday. I thought the "holiday" was a bad idea when it passed in 2010. It didn't stimulate the economy. It threatened to undermine public support for the Social Security system. And it added some $125 billion annually to the deficit.

That is, the 2 percent payroll tax holiday was completely irresponsible -- which is why I am happily shocked that the White House, Democratic Senate and Republican House let it sunset. It was the right thing to do, and Washington did it anyway. Oddly, it probably helped that this tax increase garnered relatively scant press coverage before the vote.

What's to like about the deal? Republicans would do well to adopt the attitude of Rep. Dave Camp, R-Mich., who told The New York Times that after more than a decade of trashing the Bush tax cuts, "Democrats are finally joining Republicans in making them permanent."

What's not to like? Given the shaky recovery, this is a bad time to raise taxes. But given that the Bush tax cuts were set to expire Jan. 1, this deal was better than nothing.

What's not to like, Part 2? For all of Obama's pre-election rhetoric in favor of a "balanced approach" to fixing Washington's budget woes, this cliff deal is all tax increases, no net spending cuts. Even the ethanol subsidy survived. There is no balance.

So if voters really want balance, they should root for Republicans to force spending cuts during the coming negotiations to raise the debt ceiling. As Heritage Foundation fellow J.D. Foster sardonically told me, the debt ceiling talks offer "our last best hope for peace."

Earlier in the fiscal cliff negotiations, the president tentatively accepted a proposal to reduce spending by using a different inflation index to compute Social Security benefits. For whatever reason -- maybe he wasn't in a hurry -- Obama yanked that proposition.

During the 2011 "grand bargain" talks, Obama reportedly privately agreed to raise the eligibility age for Social Security and Medicare. The president knows what needs to be done, but he won't push it.

"As we get into future budget discussions, we've confirmed something that we at Heritage have thought for a long time," Foster observed. Those reforms -- along with more means-testing for entitlements -- are easy to explain, accepted on both sides of the aisle and doable.

"We proved that in the recent fight," Foster said. "Since there's such strong agreement, all we need is a president to lead and we can do it."

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